Ravindra Rao
All active contracts of major commodities at NCDEX (National Commodity & Derivatives Exchange) traded on a stronger note as the Government of India decided not to join Regional Comprehensive Economic Partnership (RCEP).
India conveyed its decision not to join the group to protect domestic industry as well as farmers, who could have been adversely impacted by huge imports coming in from member countries.
The Regional Comprehensive Economic Partnership was an agreement between the 10-member Association of Southeast Asian Nations and six of its large trading partners, that are China, Japan, South Korea, India, Australia, and New Zealand.
India’s trade deficit with RCEP nations is estimated at around 105 billion dollars, of which, almost 50 percent of the pie goes to China alone.
“The present form of the RCEP Agreement does not fully reflect the basic spirit and the agreed guiding principles of RCEP,” Prime Minister Narendra Modi said in his address at the RCEP summit in Bangkok, according to a tweet by official broadcaster Prasar Bharati.
Commerce and industry minister Piyush Goyal said the decision not to join RCEP will boost ‘Make in India’ as he lauded Prime Minister Narendra Modi for his “bold and courageous decision to not join RCEP, since it was against our economic interests and national priorities”.
Entering into an agreement with RCEP countries, with whom India is already bearing a large trade deficit could have compelled India to import more agriculture crops like Palm Oil from Malaysia & Indonesia.
India is levying around 44 percent (surcharge included) import duties on imports of Crude Palm Oil and around 50 percent (surcharge included) import duty on RBD Palm Oil from all the countries.
By joining the economic corridor of RCEP, we would not have just lost the revenue opportunity on edible oil but have also run the risk of cheaper edible oil and oilseed being disposed by other ASEAN countries, which would have added in the woes of domestic farmers and oil refining industry.
Following the government’s decision to shun RCEP, all major commodities futures at NCDEX surged substantially on Monday. Soybean, Cottonseed oilcake, Coriander, Guargum, Guar Seed, Moong, and Jeera were the commodities which posted gains of over 3 percent at the start of this week.
(The author is Head – Commodity Research at Kotak Securities.)
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